There is more than a touch of bass in John Webster’s voice and, if he had not taken up a career in the mortgage industry, he may well have rivalled Barry White in the music world. Although we will never know what Webster’s contribution may have been to the world of soul music, his place in the mortgage industry is well established.
Webster is the joint managing director of Preferred Mortgages, a position he only took up in August, but which he has settled into quickly. Previously he was the sales and marketing director for the lender and has seen his daily routine and responsibilities change with the new role. He says: “The differences include becoming more engaged with some of the more operational areas of the business as up until now, George Patellis, the previous operations director – who is now the other joint managing director – was responsible for application processing and customer management, while I did the sales and marketing.”
Webster does not believe having two managing directors will lead to a boardroom bust-up, and says the relationship between the two men has always been good in the past. He says: “We have always had a very close relationship which made sure that the service quality matched what the sales team was telling everybody they would get. We have a conflict-free zone as a history, and have worked together well and tend to think the same way in many areas – although no doubt we still have arguments to come. One of the reasons Lehman Brothers appointed us as joint managing directors is that they watched how we worked together and felt it would work out.”
Investment bank Lehman Brothers bought Preferred from Barclays Private Equity in December 2003 and Webster says the difference in ownership has been stark. He explains: “Lehman Brothers is more involved in the business than Barclays Private Equity, and we now feel more of a family. With Barclays we knew there would come a point when the business would be sold as they invested in us with the intention of an exit. With Lehman Brothers we are part of an international corporate and want to stay part of it.”
In terms of product development, Preferred now has more hoops to jump through regarding sign off, but it has already brought a near prime product range to market in May, which Webster feels would not have happened had Lehman Brothers not owned the company.
Once the products have been sold into the market, the new ownership will also have a big part to play in making sure portfolio sales and securitisations are executed successfully. Webster says: “Everything we do will ultimately get off the balance sheet through a loan sale or a securitisation and Lehman’s expertise is in terms of helping us manage a portfolio, so when we want to securitise or when we are looking for a buyer we are not going to have any difficulty finding someone to invest. Lehman Brothers has fabulous expertise in knowing what investors want in the shop window and it was proved by the last securitisation that we had, which went very smoothly.”
As a lender, having a parent company that specialises in the investment market looks set to pay dividends, and Webster could not be happier.
Another area where Preferred has done well recently is service, and Webster believes this has been one of the reasons it has managed to grow volumes so successfully. In combination with an expanding product range, Preferred has managed to pass the £2bn mark in completed mortgages. This is impressive given that it only passed the £1bn mark in 2003 .
Webster says: “We have added a range called Extra Light, which has been responsible for a lot of product growth and we are continually improving our position with a number of intermediaries. Our service during the last 18 months has also been excellent. I am not going to say that we have service cracked for all time, but we have done well and so we are getting improved levels of business from our existing relationships.”
According to Webster, there is no great secret to ensuring intermediaries want to use Preferred as a lender, and it boils down to the simple combination of product and service. He says: “It does not go a lot beyond that relatively simple agenda. You have to have the products and you have to be able to deliver on time and make advisers look good in front of their clients.”
While Preferred has moved closer to the high street, actually taking on the mainstream lenders is not on the cards. Webster says: “We have been moving nearer the high street because we have seen that in order to grow we need to broaden the range, although I do not see us ever having a range of high street products. The economy has been relatively benign, interest rates relatively low and unemployment relatively stable and we have to have a range of products to reflect the situation.
“If people have been having fewer problems in terms of credits and their situation, then our range has to represent that. A lot more intermediaries have been dealing with us since we launched the near prime range as the product now fits the clients they have.”
Like most, Webster is waiting to see exactly how statutory regulation will affect the market and does not profess to have any great insight as to how things will turn out. However, he feels the number of distributors will shrink, and is surprised that many intermediaries have left it very late in the day before making the decisions that will shape how they do business in the future.
Overall, he believes regulation will be workable, although he feels the Financial Services Authority has left too many areas of the rulebook open to interpretation. He says: “There are going to be fewer distributors out there, but I do not know how many. My fear is that come 31 October there may be more intermediaries than people think who have not got themselves in the appointed representative or directly authorised camp.”
In terms of the grey areas yet to be resolved, he adds: “There is still too much about regulation that is open to interpretation. If we are not operating to the same rules then it does not achieve the consistency they are looking for – things like inducements need to be cleared up.
“We reckon that anything more then £50 per completion should be classified as a material inducement and we will show it if it exceeds this. In simple terms, we will take the amount spent on a distributor and divide it by the number of cases we receive. If it is more than £50 we will declare it and have decided this internally. Everyone’s definition of the word ‘material’ will be different and we have taken advice on this from our lawyers who have said they feel £50 a case is a reasonable interpretation.”
Looking to the future, Webster is keen to see the business continue to grow, although it may have to look further afield than its Hayward’s Heath headquarters in the coming years. He says: “As we expand the business there is a limit to the size the company can become in Hayward’s Heath. We would like to use all the automation we can so that as the business grows we do not need to have a pro rata increase in the number of people we have. We may need a number of other regional processing centres – there is one in Glasgow – and talks are underway. However, these are in the very early stages and no decision has been made as to where they might be or how big they will be.”
Although Webster talks about automation, Preferred has not led the charge in this area. He explains that this has never been part of the lender’s game plan: “We do very little online business at the moment. We have the facility that intermediaries can submit an application in principal, but one of the things that people like about dealing with Preferred is that there is quite a lot of people contact and what we have to do is make the most of the automation side of things without losing the people side of it. Once we have got the key facts illustration sorted out the next thing we want is online mortgage application submission to give intermediaries the ability to work online and we will see what happens.”
Under Webster’s direction, Preferred looks ready to take on the challenges that lie ahead.
